28,000 federal patents and the monopoly meme went into a bar, 2

Howard Forman’s 1976 testimony is where the 28,000 patents meme enters what will become the Bayh-Dole rhetoric. Senator Bayh uses Forman’s meme when he introduces S. 414 in 1979:

When the Government decides to retain patent rights on these inventions there is a very great chance that they will never be developed. Of the 30,000 patents that the Government presently holds, less than 4 percent are ever successfully licensed.

By 1979, Forman’s 26,000 patents that he recited as 28,000 patents has become 30,000 patents. (And, yes, the federal government did acquire about 4,500 new patents from 1976 through 1978–so apparently Bayh used Forman’s written statement figure of 26,000 patents. Anyone using the 28,000 patents figure is clearly being irresponsible with the facts). Bayh combines two elements that aren’t connected:

(1) There is a great chance that an invention will never get developed.

(2) The government acquires a patent right in any invention.

Element (1) is on average generally true. Estimates of patented invention use run about 5%. The question, then, becomes one of whether government ownership of an invention changes the likelihood of use. But even then, we are talking about averages–and averages throw out much of the structure of the data. We might find that government ownership is essential for the use of some inventions and adverse to the use of others. We might find, furthermore, that it is not ownership that matters, but what the owner does with the rights of ownership. We might find, then, that the government obtaining a patent works against use, or facilitates use. We might find that a mere patent right made available to all attracts use. And in other cases we might find that a patent right made available to all inhibits use. But in this last case, we might pause to wonder who it is that might be attracted, and who is inhibited.

It doesn’t matter how many government-owned patents are licensed–the government generally made its inventions available without formalities. Licensing was a non-issue and could not possibly be a measure of utilization. Furthermore, licensing itself does not indicate utilization–just because some patent is licensed does not mean that the underlying invention gets used, developed, sold, or that the public is better off for any of that activity. The product could be inherently bad (radium elixir!) or defective (not the advertised amount of radium!) and cause a great deal of injury or suffering or financial loss.

But Senator Bayh bluffed, putting a spin on things–politics.

This is very little return on the billions of dollars that we spend every year on research and development.

Here Bush makes an unsubstantiated claim. It takes the form of a logical conclusion to the premise, also not substantiated, that few inventions get used because the government takes ownership of them and makes them available for all to use as if those inventions were in the public domain. Thus, so it goes, few get used and therefore it must be that we get little return on the public’s money. But nothing here follows at all.

A handful of inventions may be used and that use may involve a huge financial benefit (or health benefit) to the public that makes all the other research expenditures worth it. This is, in short, an argument from portfolio–one does not need every asset in the portfolio to have a great return. All that matters is that some elements of the portfolio do well. That argument, in fact, is implicit in nearly all university patent licensing programs–it does not matter that 99% of the inventions we claim are never used, so long as one invention every two decades is financially successful, then the whole program is successful and the public has got a good return on its investment. It doesn’t hold together as an argument for the use of inventions, and thus university officials rarely articulate it in public. But it is at the base of almost every university patent licensing office budget review.

If Bayh was correct with his claims about the return on investment from federal management of patentable inventions, and that was good enough to pass Bayh-Dole, then the current situation, in which universities hold nearly twice as many patents on federally supported inventions and produce even less “return,” should be sufficient to shut down Bayh-Dole–at least for universities.

Bayh prefaces his argument regarding the 30,000 federal patents and the illusion of ineffectual federal management with arguments that have to do with regulations directed at different situations and the opposition of those regulations to the monopoly meme, which holds that without a patent monopoly, even useful inventions won’t be used by industry.

Presently, there are over 20 different statutes and regulations in existence which govern ownership of inventions that are reported to the Government each year from its research programs.

Sounds bad.

The underlying philosophy of these policies is that the funding agency should retain title to these inventions

Not so bad–the statutes provide for federal ownership, taking precedence over state law, private deals, and federal agency uncertainties. Further, the point of federal ownership of inventions is to use the patent system to disseminate new technology, not to suppress it in favor of a single monopolist. In other words, federal policy here is that some areas of federal activity should not produce patent monopolies for anyone–not the contractors, not the federal government, not even the inventors. We might say that deferring on monopolies comes with opening up new frontiers.

even if the agency has provided only a small percentage of the funding.

The “even if” means, here, that this is the real objection–that if a contractor accepts federal money, then the entire project is turned into a frontier-opening project without patent monopolies. Implied is that contractors would rather have the patent monopolies. The historical evidence is that in neither military applications nor basic science did contractors care much for patent monopolies.

Bayh imputs to them the property that they must have patent monopolies, that rational contractors required patent monopolies. Bayh implies that the relative amount of funding ought to determine ownership of inventions, rather than, say, what the funding was for, and on what terms. No contractor has to accept federal funds. Why would any rational contractor accept a tiny federal contract relative to the contractor’s own investment, if patent monopolies mattered?

Unfortunately, the agencies have had very little success attracting private industry to develop and market these inventions

Bayh implies that federal agencies in general need private industry to develop inventions or have the objective of creating commercial products. Opening up new frontiers in science does not require private ownership. If development is so necessary, then development itself will produce new inventions that may be owned privately, as inventors determine, and new technical information that the possessors may keep secret as they choose. Bayh conflates the incentive to develop from the public domain one’s own new technology with the incentive to develop only what one gets from someone else as a monopoly. These, perhaps, are very different sorts of people–predators versus scavangers, say.

because when the agencies retain the patent rights there is little incentive for any company to undertake the risk and expense of trying to develop a new product.

Again, Bayh ignores history. The Harbridge House report from 1968 is full of examples of industry developing new technology without any one company holding a patent monopoly over the rest. Harbridge House also found that when a federal agency developed a new technology to the point of practical application–a new fertilizer, say–then companies were quick to adopt it and configure it as a new product. And when the military paid companies to develop new weapons, and there were inventions made in doing so, there was no particular purpose in developing those inventions into new products other than as necessary to produce the weapons the military specified. There was no need for additional new commercial products–no “dual use” of the inventions. One could assert that there were dual uses possible–but those uses were not of interest to either the military or to the contractors seeking contracts with the military.

Bayh makes a case for a kind of speculator company that spends money only when it has a complete monopoly on any resulting product. Perhaps Bayh had in mind companies that want to be the next United Shoe Machinery or RCA without having to battle to gain dominating control over a technology market. That is–how executives in companies that are already big think.

Bayh tips his hand that this apparently general problem is really one of the pharmaceutical industry’s making:

This problem is especially serious in the field of biomedical research programs where delays by the agencies in granting patent waivers for new drugs and processes have condemned many people to needless suffering.

According to Harbridge House, the problem was not delays in federal agencies allowing pharmaceutical companies to hold patent monopolies in inventions involving public health, but rather the companies involved in developing public health products worrying that federal funding might “contaminate” their efforts. The policy issue then was one of participation in federal research programs. Why should an industry that does not want to participate then be provided with incentives to participate anyway? Why should government suddenly favor an industry with monopolies simply because that industry boycotts participation in federally supported research–whether “basic” or to meet public health needs.

Here one might point out a purpose of the “war on” metaphor. In a war, industry is called upon to collaborate in the production of necessary war products–there’s no time or purpose in filing infringement suits to prevent other companies from participating in making product needed by the military. Now consider a “war on polio” or a “war on cancer.” There is a moral claim made in putting things this way–those companies that choose to participate should also agree to collaborate on the effort, making the objective more important than their own future positions.

But the “war on” metaphor requires more from the government than company participation–it requires government-funded development or purchasing. It is in the nature of war that it is conducted by governments. Thus, we might propose that the Public Health Service failed in its use of the “war on” metaphor by refusing to finance drug development and failing to purchase what was developed in the quantities necessary to “fight” the war.

That left available the idea that companies would have to develop public health products based on some federal research and then any one company to participate must hold an absolute monopoly on not just the products it might make but also on the basic patents to a broad class of compounds and methods. It’s like a tacit agreement among the companies in an industry to divide up the market by patent monopolies on areas of basic chemistry and biology.

What isn’t often taken up, however, is that companies dividing up patent monopolies is not the only remaining way for new drugs to be developed–there is also collaborative development and development supported by private foundations. We might also mention that research to find ways to prevent disease or to heal disease without the use of formulated, synthesized drugs is also a reasonable approach to improving public health.

[And if Bayh’s main point, that there is “very little return” on the billions spent on federal research, is true, then oh wow nothing like Bayh-Dole and its fussiness for adding yet another layer of bureaucracy on research findings will help it. Who owns doesn’t much matter if there’s nothing much worth owning. And if the ownership dispute is between which poorly performing bureaucracy can do a better job, we really are wallowing in the gutter of opportunity. The Harbridge House report (1968, the only credible report on federal ownership of inventions) showed that licensed inventions performed more poorly than owned inventions, and inventions owned by inexperienced organizations performed more poorly than those owned by experienced organizations. If one wanted to construct evidence-based policy, then, one would require inventions made at nonprofits to be assigned to companies with experience, and get the nonprofits out of it altogether. But more so, one might shut down a whole lot of federally funded research and think about using the money a different way–again, if Bayh was correct that federally supported research has been largely unproductive, and if that’s still true (seems to be), then Bayh-Dole could never have been a solution and isn’t one now. The problem with research “productivity” in the form of public benefit has to with the research, and who does the research, and why, and not so much on the ownership of patents on inventions made in that research.]

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